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Part II:
Focus on School Taxes

Texas independent school districts (ISDs) reported to the Comptroller's Property Tax Division (PTD) a total of almost $17.3 billion in 2003 school property taxes. This $858 million increase was 5 percent more than the 2002 total school taxes of $16.4 billion.

The 2003 average statewide tax rate increased almost 2 cents above the 2002 average rate. About 17 percent of Texas school districts reduced their local adopted tax rates, 43 percent kept the same rate and the remaining 40 percent of the districts increased their rates.

The 2003 school property value reports are for 1,031 Texas school districts, two less than in 2002. Allison and Fort Elliott ISDs in Wheeler County consolidated to form the Fort Elliott Consolidated ISD. Goree and Munday ISDs in Knox County consolidated to form the Munday Consolidated ISD.

The ISD reports do not include local school taxes by special county equalization districts and South Texas ISD, a school district that operates tuition free magnet schools for students in a three-county area. Tax rates reported are per $100 of property value.

School Tax Rates

The 2003 simple average statewide tax rate was $1.552 per $100 of value, almost a 2-cent increase above 2002’s average rate. The 2002 simple average statewide tax rate was $1.534 per $100 of value, a 5 cent increase above 2001’s average rate.

This simple average rate calculation uses the adopted tax rates divided by the number of ISDs reporting. This average does not consider any overall tax value or levy changes resulting in tax rate increases or decreases.

Table 10 provides rate change information for school districts. School boards in 180 districts—about 17 percent—reduced their school tax rates. Some 439 districts—about 43 percent—kept the same rate as in 2002. Another 412 districts—or 40 percent—saw their tax rates rise from less than 1 percent to nearly 178 percent in 2003.

Table 10 - 2003 Total Rate Changes in Texas School Districts
Percent Change in Rate from 2002 Number of ISDs Percentage of All ISDs
Decreases
Less than 1 percent 91 8.8 percent
1 to 10 percent 83 8.1 percent
More than 10 percent 6 0.5 percent
Subtotal 180 17.4 percent
No Change 439 42.6 percent
Increases
Less than 1 percent 80 7.8 percent
1 to 10 percent 298 28.9 percent
More than 10 percent 34 3.3 percent
Subtotal 412 40.0 percent
Total 1,031 100 percent
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.


Table 11 shows the range of school tax rates. The adopted 2003 ISD tax rates ranged from a low of $0.8998 per $100 of value in Nursery ISD in Victoria County to a high of $1.98 in McKinney ISD in Collin County.

Table 11 - What was the range of 2003 ISD rates in Texas?
Total ISD Rate Number of ISDs Percentage of All ISDs
Less than $1.00 4 0.4 percent
$1.00 to $1.20 15 1.4 percent
More than $1.20 to $1.40 99 9.6 percent
More than $1.40 to $1.50 311 30.2 percent
More than $1.50 to $1.60 261 25.3 percent
More than $1.60341 33.1 percent
Total 1,031 100 percent
Rates are based on $100 of property value.
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.

Only four districts had adopted tax rates of less than $1.00, compared to seven districts for tax year 2002.

About 41 percent of the districts—or 425—had combined rates between $1.00 and $1.50 per $100 of value. The remaining 602 districts, or 58 percent, had rates range from above $1.50 to the high of $1.98.

Property tax rates may consist of two parts: a maintenance and operations (M&O) rate and an interest and sinking fund (I&S) rate. The M&O rate covers general operating costs. The I&S rate, which is usually called the "debt" rate, is used to repay a district's debt.

The state's 2003 simple average M&O rate for ISDs was $1.447, while ISDs’ debt rate averaged $0.106.

State law places a tax rate cap of $1.50 on M&O rates. School boards in 489 ISDs—about 47 percent—adopted an M&O rate at the rate cap, compared to 405 ISDs, or about 39 percent in 2002. Another 32 percent—or 333 districts—have M&O rates between $1.40 and $1.50, compared to 2002 when 350 districts, or 34 percent, had M&O rates in that range.

Seven school districts in Harris County adopted tax rates above the $1.50 cap. These districts have authority by voter election for a higher M&O rate cap. The seven districts were Aldine, Deer Park, Galena Park, North Forest, Pasadena, Spring Branch and Katy ISDs. Katy ISD is located in both Harris and Waller Counties.

About 30 percent—or 307 districts—do not have a 2003 debt rate for repaying debt obligations. Of the 724 ISDs with debt rates, four districts have a debt rate of more than $0.40. McKinney ISD in Collin County set the highest debt rate at $0.48. With its M&O rate of $1.50, the district's total rate was $1.98, the highest adopted 2003 rate of all school districts.

School Tax by Property Type

In 2003, residential property, including single-family homes, multi-family units and residential inventory, continued to pick up a greater share of the school tax burden. Texas residential properties represented the largest category of property at almost 51 percent of the total amount in school taxes, climbing more than 2 percent from 2002 taxes at about 48 percent.

Businesses paid 42 percent of local 2003 school taxes, down from about 44 percent of the 2002 school taxes.

All residential properties saw the school tax share increase just over $810 million to total $8.7 billion in local school taxes. Owners of single-family residences paid almost 45 percent of local school taxes and saw their 2003 school property taxes grow by $771 million. In comparison, single-family residences paid about 42 percent of local 2002 school taxes. The typical homeowner has seen the average home's taxable value (allowing only for the standard $15,000 school homestead exemption) rise from $76,326 in 2002 to $81,590 in 2003, almost a 7 percent increase.

Texas businesses paid about $7.25 billion in 2003 local school taxes, almost $8 million less than in 2002. Of all types of business properties, only one category experienced a tax increase—commercial real property at $108 million. All other business categories, including commercial personal, industrial real, industrial personal, oil and gas properties, utilities and special inventory, paid less in 2003 taxes than in 2002.

Vacant lots, rural acreage and farm and ranch improvements generated just under 7 percent of local school taxes with about $1.2 billion, a $70-million increase from 2002.

Table 12 shows Texas properties grouped into four main property types: residential, business, acreage/lots/farm & ranch improvements and other personal property. The fourth type—other personal including privately owned vehicles in school districts where they are taxed—represented about one-half of 1 percent of total school taxes at $84 million.

Table 12 - School Property Tax Burden - 2002 to 2003 (in billions)
Property Category 2002 School Taxes * % of Total 2003 School Taxes % of Total $ Change 2002 to 2003
Residential Property
Single-Family Residences $6.96 42.46 $7.73 44.82 $0.77
Multi-Family Residences 0.88 5.38 0.92 5.34 0.04
Residential Inventory 0.07 0.41 0.07 0.39 0.00
Subtotal, Residential $7.91 48.25 $8.72 50.56 $0.81
Acreage/Lots
Vacant Lots $0.43 2.60 $0.46 2.66 $0.03
Acreage 0.39 2.39 0.39 2.29 0.01
Farm & Ranch Improvements 0.30 1.83 0.33 1.92 0.03
Subtotal, Acreage/Lots $1.12 6.82 $1.19 6.87 $0.07
Business Properties
Commercial Real Estate $2.77 16.90 $2.88 16.69 $0.11
Commercial Personal 1.32 8.04 1.30 7.56 (0.02)
Industrial Real Estate 1.06 6.49 1.05 6.08 ($.01)
Industrial Personal 0.79 4.83 0.76 4.41 ($.03)
Oil, Gas & Minerals 0.61 3.74 0.60 3.50 ($.01)
Utilities 0.65 4.00 0.62 3.63 ($.03)
Special Inventory 0.05 0.34 0.04 0.22 ($.01)
Subtotal, Business $7.26 44.34 $7.25 42.08 ($0.01)
Other Personal Property
Vehicles** $0.00 0.02 $0.00 0.02 $.00
Other Personal 0.09 0.58 0.08 0.47 ($.01)
Subtotal, Other Personal $0.09 0.60 $0.08 0.49 ($.01)
Total $16.38 100.00 $17.24 100.00 $0.86
Numbers may not add due to rounding.
Allocation of tax estimates to property categories based on values, exemptions and tax levies (not collections) reported by school districts.
* 2002 tax levy includes adjustments reported by independent school districts since fall 2002.
** Vehicles represent less than 1/10th.
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.

2003 School District Property Value Study

Texas school districts’ taxable property values totaled almost $1.06 trillion in 2003, an increase of more than 4 percent or roughly $43 billion more taxable value than in 2002.

Independent school district (ISD) property values were up for the 11th year in a row, based on numbers from the Texas Comptroller’s property value study (PVS). School property values have continued to rise since the 1992 study findings.

Texas Comptroller Carole Keeton Strayhorn certified the final determination of school property values—based on the appraisal date of January 1, 2003—to Education Commissioner Shirley Neeley on July 1, 2004.

The Education Code requires the Texas Education Agency to use the Texas Comptroller’s annual estimates of individual school district taxable wealth to determine state aid payments. The Comptroller’s findings in Table 13 may be obtained by ordering the agency’s School and Appraisal Districts’ Property Value Study – 2003 Final Report. Individual school and appraisal district findings are also available on the Comptroller's Web site at www.window.state.tx.us/taxinfo/proptax/pvs03f/.

Table 13 - Statewide School District Taxable Values 2002 vs. 2003 (in billions)
  Property Category 2002 Final Value 2003 Final Value % Change $ Change
A. Single-family Residences $548.01 $593.67 8.33% $45.65
B. Multi-family Residences 53.58 55.25 3.11 1.67
C. Vacant Lots 25.84 27.40 6.06 1.56
D. Rural Real 51.77 53.82 3.98 2.06
F1. Commercial Real 169.03 174.78 3.41 5.76
F2. Industrial Real 70.37 67.43 -4.19 -2.95
G. Oil, Gas, Minerals 40.94 39.47 -3.58 -1.47
J. Utilities 41.07 38.89 -5.32 -2.17
L1. Commercial Personal 86.51 86.31 -0.24 0.21
L2. Industrial Personal 54.35 55.59 2.27 1.23
M. Other Personal 5.44 5.36 -1.58 -0.09
N. Intangible Personal & Uncertified * 5.42 1.21 -77.57 -4.20
O. Residential Inventory 4.20 4.90 16.54 0.69
S. Special Inventory 3.61 3.51 -2.63 -0.09
  Subtotals $1,160.15 $1,207.59 4.09% $47.44
Homestead $15,000 $63.31 $65.55 3.54% $2.24
Homestead $10,000 10.91 11.24 3.07 0.33
Disabled Veteran 1.23 1.31 6.05 0.07
10% Capped Homesteads 14.16 10.91 -22.95 -3.25
65+ Tax Ceiling Loss Value 35.19 38.56 9.58 3.37
Abatements 0.17 0.06 -64.83 -0.11
Tax Increment Financing 4.18 4.95 18.34 0.77
Freeport Exemption 10.00 10.84 8.37 0.84
Pollution Control 5.13 5.48 6.97 0.36
Deferred Payment 0.44 0.63 43.14 0.19
Other Exemptions 0.24 0.20 -18.23 -0.04
Less Total Exemptions $144.96 $149.73 3.29% $4.77
Total Taxable Value $1,015.19 $1,057.86 4.20% $42.67
NOTE: Totals may not add because numbers are rounded.
* Not a valid comparison because reporting procedures changed from 2002 to 2003.
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.

While there are 1,031 school districts, the Comptroller’s certification is for 1,049 districts because some school districts’ values are divided among more than one appraisal district.

The Comptroller certified the school district’s local tax roll values in 1,038 of the 1,049 studied school districts. They accounted for about $1.05 trillion in taxable value, or more than 99 percent of the total taxable value in Texas.

In 11 of the 1,049 studied districts, local tax roll values were below the agency’s 5 percent margin of error and did not meet the criteria for the new grace period. The Comptroller certified the state value determination for those 11 districts at almost $6 billion.

Grace Period

The final findings had 54 of the 1,038 school districts within the new “grace period” provided by Senate Bill (S.B.) 671, 78th Legislature, Regular Session. These 54 districts represent about $22 billion in taxable value. S.B. 671 provides a two-year reprieve to certain school districts from the funding effects of state value findings in the annual study.

The new law requires the Comptroller to conduct a mandatory appraisal standards review of the appraisal district with school districts under the “grace period.” The 40 appraisal districts that perform appraisals for these 54 ISDs will have an appraisal standards review.

Property Value Trends

For tax year 2003, taxable values increased in 764 school districts, with an average increase in value of almost 8 percent. In comparison, 819 school districts had an average increase in value of more than 11 percent in tax year 2002.

Values declined in 285 districts by an average of less than 6 percent from 2002 to 2003. In the preceding study, values declined by an average of less than 7 percent in 233 school districts.

The final 2003 study, before exemptions, revealed an increase of more than 8 percent in the value of single-family residences, following an increase of almost 11 percent in 2002 and 12 percent in 2001. This category is the largest in appraised value, representing 49 percent of the total school district appraised values.

Multi-family residences values increased more than 3 percent in 2003, following a 6 percent increase in 2002.

Changes in business properties’ values varied, depending on the type. Commercial real property increased about 3 percent, following an increase of 4 percent from last year. Industrial real property saw appraised values decrease more than 4 percent, following less than a 1 percent increase in 2002.

Industrial personal property gained slightly more than 2 percent, compared to a 3 percent decrease in 2002. Commercial personal property stayed almost flat, with less than a 1 percent decrease.

Utilities decreased more than 5 percent in value from 2002 to 2003, after an increase of almost 5 percent in 2002. Oil, gas and minerals have seen both ups and downs in recent years. This category dropped for the second year in a row by more than 3 percent.

Residential inventory, which is residential property held for sale by the developer, experienced a third year of increase in value by more than 16 percent. Special inventory, which is inventory value of motor vehicle, boat, heavy equipment and manufactured housing that dealers are required to report to appraisal districts and county tax offices, decreased about 2 percent.

Intangible personal and uncertified property included miscellaneous properties listed on the local tax rolls.

Exemptions

The final 2003 study findings also showed that school districts’ exemptions and abatements increased more than 3 percent from the final 2002 study. The total 2003 amount exceeded $149 billion and was more than $4 billion above 2002.

Homestead exemptions accounted for about 85 percent of all exemptions. Those exemptions include the state mandated $15,000 exemption for general homeowners, the state-mandated $10,000 exemption for disabled or elderly homeowners, the school tax ceiling (or freeze) for over-65 homeowners, the capped value on homesteads and the deferred homestead payments.

Government Code Section 403.302 specifies the exemptions and productivity value loss for special appraisals that the Comptroller deducts from market value to determine the taxable value of property in school districts.